Ringgit Strengthens to Eight-Month High on Rate-Increase Bets

Malaysia’s ringgit climbed to an eight-month high on speculation the central bank will raise the policy rate for the first time since 2011 at this week’s review.

Fourteen of 19 economists surveyed by Bloomberg predict Bank Negara Malaysia will boost the benchmark rate to 3.25 percent from 3 percent on July 10. The rest see no change. The ringgit has appreciated 1.3 percent in the past month, the best performance among 24 emerging-market currencies tracked by Bloomberg after the Indonesian rupiah and Columbian peso.

“The ringgit continues to benefit from expectations of a Bank Negara rate hike on Thursday,” said Khoon Goh, a currency strategist at Australia & New Zealand Banking Group Ltd. in Singapore. “The market’s fully pricing in a hike this Thursday, and one more by end of the year.”

The ringgit advanced 0.6 percent, the biggest gain in two weeks, to 3.1712 per dollar in Kuala Lumpur, according to data compiled by Bloomberg. It rose to 3.1685 earlier, the strongest level since Nov. 1. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, fell 10 basis points, or 0.10 percentage point, to 4.88 percent.

Malaysia’s local-currency government bonds returned 0.5 percent in the past month, compared with losses of 0.5 percent in the Philippines and 0.6 percent in Thailand, respectively, indexes compiled by Bloomberg show. Indonesian notes were little changed.

Bets that Bank Negara will raise borrowing costs have intensified after consumer-price increases reached 3.5 percent in March and February, the fastest pace in almost three years. Inflation eased to 3.2 percent in May and 3.4 percent in April. Last month’s data will be released July 16.

The yield on Malaysia’s benchmark three-year sovereign debt, the nation’s shortest maturity and the most sensitive to the rate outlook, climbed one basis point to 3.52 percent, data compiled by Bloomberg show.

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